CALGARY, Alberta, Sept 30 (Reuters) - Growing natural gas production and a surplus of supply in storage has depressed prices for the fuel and battered the cash flows and shares of Canada's gas producers. The outlook? It won't please anyone who's investment horizon isn't at least a year away.

Investors looking for a rebound in the price of the commodity and corresponding gains in the shares of gas producers Encana Corp

, Tourmaline Oil Corp , ARC Resources Ltd

and others may need to be patient. There is little on the horizon to suggest that prices are going to rise in the near term.

"I think we're in for a long period of low gas prices," said Gordon Currie, an analyst at Salman Partners. "We have to get used to that idea."

For a few years before the 2008-09 financial crisis, benchmark natural gas prices on the New York Mercantile Exchange routinely traded between $6 and $8 per million British thermal units and would surge well above $10 when hurricanes cut into production in the Gulf of Mexico.

Since the start of 2010, prices have been falling as gas production surged from the massive U.S. shale-gas fields unlocked by hydraulic fracturing techniques. At the beginning of 2010 benchmark prices were above $6 per mmBtu. By April of this year, they had dropped below $2 for the first time in more than a decade.

That drop has cut into the shares of the big Canadian gas producers. Encana stock has fallen 40 percent since the start of 2010. Talisman Energy Inc

is down 34 percent over that period and Canadian Natural Resources Ltd has fallen by 21 percent.

Though gas has since rebounded to above $3.25 per mmBtu, the amount of gas now in storage for winter use may keep a lid on prices unless North America suffers through a bitterly cold winter.

In its last weekly report, the U.S. Energy Information Administration said U.S. gas stocks stood at 3.58 trillion cubic feet, 296 billion cubic feet higher than a year earlier, and nearly 9 percent above the five-year average level for the third week of September.

The situation in Canada is no better. According to figures compiled by Canadian Enerdata, Canadian gas-storage facilities were 95 percent full as of Sept. 21, 7 percentage points above their year-earlier level with five weeks remaining in the gas-injection season.

If prices are to rise, demand has to increase significantly or supply has to begin to wane. The EIA said on Friday that U.S. dry natural gas production in June averaged 65.4 billion cubic feet a day. Five years earlier, production was about 53 billion cubic feet a day.

But the appetite among U.S. producers to boost supply has waned. Data from oilfield service company Baker Hughes released on Friday showed the number of drilling rigs targeting natural gas dropped this week to just 435, the lowest since June 1995.

Lower drilling will cut into production as companies fail to replace the gas they produce with new reserves. Eventually that lost supply will result in higher prices, but the impact may not be seen for months.

"The (price) forecast is more optimistic but it's more of a developing 2013 story," said Martin King, a commodities analyst at FirstEnergy Capital Corp. "We're going to have some improvement but it's not stellar and it's more of a second-half (of the year) story."

If reduced supply does help boost prices later in 2013, long-suffering investors may see the value of natural gas producers rise as well.

Investors "are generally bullish on natural gas right now," said Matt Donohue, an analyst at UBS Securities. "People see a lot of valuation upside."

Donohue said companies such as ARC Exploration, Tourmaline and Peyto Exploration & Development Corp

, with experienced management teams and growth potential, may be among those best poised to benefit from a potential boost to gas prices.

Still, patience will be required and there is no indication that prices will return even to where they stood at the start of 2010.

"I think 2012 will be the low point for pricing," King said. "The improvement next year on an absolute dollar basis will not necessarily tickle anybody pink, but it's going to be definitely going to be off the lows of what we saw in March and April."